IRA Relief Heading Our Way?

Although the biggest attention-getter among the many retirement-account tweaks in President Obama’s fiscal 2014 budget proposal is a $3.4 million cap on total tax-deferred savings, there’s some relief buried in the fine print.

Weekend Investor walks through a number of proposed changes to retirement savings in the budget in a story published online this afternoon. But there’s one potential fix in the budget that wound up on the cutting-room floor, so to speak:

People who inherit individual retirement accounts could get help fixing problems, as long as they act fast.

Deep in the budget is a provision that would let heirs to IRAs put the money back in the account if an IRA custodian cuts them a check, rather than transferring the assets directly into another inherited IRA.

Currently, when heirs mistakenly make withdrawals, they would owe tax immediately. The new provision would let people with inherited IRAs and other tax-deferred retirement accounts roll over the money within 60 days to a new account (in this case, a new inherited IRA), just as people holding their own IRAs can do.

It might not seem very exciting, but if you inherited a $100,000 IRA on which you suddenly owed tax because a custodian mistakenly cut you a check instead of transferring it to another account, you’d be thanking Uncle Sam for the reprieve.